Maximizing Social Security for Widows: The Restricted Application Strategy

Editor’s note: The above video was recorded before the Social Security Fairness Act was signed into law, repealing the WEP and GPO.

Understanding Social Security’s Restricted Application for Widows and Widowers

The restricted application strategy, largely phased out for retirees born after January 2, 1954, remains an important tool for widows and widowers seeking to maximize their Social Security benefits. In a discussion with Robert Powell, financial expert Dana Anspach from Sensible Money explains how this strategy works and how surviving spouses can take advantage of it.

Maximizing Benefits Through a Restricted Application

Anspach shares the story of Carla, a widow whose late husband Larry was 15 years older than her. To preserve her eligibility for survivor benefits, Carla was advised not to remarry before age 60. By following this guidance, she was able to claim a widower’s benefit at her full retirement age while allowing her own retirement benefit to grow until she reached 70. This strategy resulted in a significant financial gain—receiving $29,000 annually from 66 to 70 before switching to a $44,000 benefit at 70.

Common Pitfalls and Misconceptions

Anspach also highlights the case of Diane, another widow who was misinformed about her options. By waiting until 62 to claim benefits instead of 60, Diane missed out on nearly $1,900 per month, amounting to a $200,000 lifetime loss. This underscores the importance of consulting knowledgeable financial advisors rather than relying solely on Social Security office guidance.

Key Considerations for Widows and Widowers

Waiting Until Full Retirement Age: Survivor benefits are reduced if claimed early, so delaying until full retirement age maximizes payouts.

Understanding Benefit Calculation: If the deceased spouse had not claimed Social Security, the survivor benefit is based on their full retirement age amount.

Survivor Benefits and Remarriage: Remarrying after 60 does not affect eligibility for survivor benefits, allowing for financial and personal flexibility later in life.

The Importance of Financial Planning

Losing a spouse is a traumatic event, and making rushed Social Security decisions can lead to costly mistakes. Survivors should take the time to research their options or seek professional advice to ensure they maximize their benefits.